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A guide to LGBTQ+ personal finance

Navigating personal finances, tax, estate planning and pensions can be more complicated if you are a member of the LGBTQ+ community. Here are some handy tips to make the journey easier.

Couple sorting through their finances

Thankfully, the UK has made key strides over the past couple of decades in efforts to ensure LGBTQ+ individuals enjoy the same legal, civil and consumer rights as their heterosexual counterparts. 

But in some cases non-heterosexual individuals and couples can still have a harder time navigating state benefits, financial products and consumer issues.

Here are some tips to help you navigate complex issues like benefit entitlements, pensions and estate planning.

State benefits

Same-sex couples who live together are now treated as a couple when claiming for means-tested benefits, whether you are living together, married or in a civil partnership. 

This means that your financial resources and requirements are jointly assessed when applying for certain benefits, including:

  • Universal Credit

  • Income Support

  • Income-related Employment and Support Allowance

  • Income-based Jobseeker’s Allowance

  • Working Tax Credit

In practice, this may mean that you’ll receive less from the benefit schemes listed above, as your partner’s financial situation is taken into account in the same way as a heterosexual couple’s finances would be examined.

However, your eligibility and the amount you may receive in payments when applying for non-means tested benefits will not be affected by your relationship status. 

These benefits include:

  • State pension 

  • Attendance Allowance

  • Personal Independence Payment 

These benefits are all calculated on the basis of your individual circumstances.

If you are in a civil partnership, you may be able to claim a bereavement support payment if your partner dies. 

You may also be eligible for a state pension based on a partner’s national insurance contributions.

If you have children, you may also be able to claim Child Benefit. Citizens Advice has a handy guide to help you work out if you’re eligible.

If your relationship ends, you and your partner have a legal responsibility to support one another financially at the end of a marriage or civil partnership and to make provision for dependent children.

If you’re thinking of creating a civil partnership as opposed to getting married, in some circumstances it can be beneficial to draw up a document known as a pre-registration agreement.

This is similar to a prenuptial agreement that some couples draw up before getting married. 

A pre-registration agreement can set out your rights and obligations towards one another if the relationship ends. The agreement can cover what should happen to personal possessions, assets, pensions and arrangements for any children.

Citizens Advice has full details on how a pre-registration agreement works.

Tax and personal allowances

Although you may be living with a partner, each partner is taxed separately.

Each tax year you have a personal allowance which, for the 2020-2021 tax year, is £12,500. This is the amount of income that you do not have to pay tax on.

You may also be eligible for the Marriage Allowance. This enables a couple to transfer £1,250 of their personal allowance between them. However, to benefit from this you have to be married or in a civil partnership. In addition, one of you needs to be a non-taxpayer while the other is a basic rate taxpayer.

Elsewhere, your Capital Gains Tax allowance, which is worth £12,300 for an individual and £24,600 for a couple in 2020-21, is the amount of profit you can make from an asset in a tax year before you begin to pay tax on those profits. 

Married couples and civil partners can transfer assets between one another without incurring Capital Gains Tax. Other allowances, such as your personal savings allowance and ISA allowance, remain the same and cannot be transferred between partners.

 Compare ISA savings and investment accounts.

Pensions and retirement

Until recently there were still some key differences in the way that occupational and privately held pensions were treated for same-sex couples. 

According to the charity Age UK you can be entitled to a survivor’s pension from your spouse or civil partner’s occupational pension scheme if they die before you.

Before 2017, these pension schemes were only required to offer survivor’s benefits to same-sex couples based on the deceased pension saver’s contributions (or ‘service’) from 2005 onwards.

This changed four years ago when the UK Supreme Court made landmark ruling that any discrimination based on sexual orientation in the provision of pensions was illegal. 

 The LGBT+ advocacy group and charity Stonewall has full details on how being in a civil partnership or same-sex marriage can impact on payments to pension savers’ surviving partners.

Thankfully, provision for LGBTQ+ retirees is steadily improving, and not just in financial products. One example of this is the launch of a retirement community catering specifically to LGBTQ+ pensioners in central London, set to open this summer.

Compare private pension providers, to help your money go further when you retire

You can help ensure you have the retirement you want by finding the best personal pension plan to make your money work as hard as it can.

Insurance

Life insurance used to be problematic, particularly for gay men. Thankfully financial discrimination is now illegal on the grounds of sex or sexual orientation, just as it is for race.

Searching the market will give you a wide range of competitive quotes for both life insurance and travel cover. As with all insurance products, make sure you check the exclusions and terms and conditions before you sign up.

Compare life insurance quotes.

While there are not many specialist insurance firms uniquely catering to the LGBTQ+ community, there are groups who can offer advice or act as go-betweens with advisors from financial firms to help identify products for your particular needs.

Firms like Emerald Life offer extras which can be added to insurance policies for extra financial protection.

For example, Emerald Life’s home insurance policy includes cover for malicious damage through hate crime or homophobia and optional legal expenses cover against discrimination. Its travel insurance policy covers foster, adopted and surrogate children.

Estate planning and inheritance

Having a civil partnership or marriage can offer some financial protection to your partner if you die. When you get married or enter a civil partnership you will need to rewrite your will as all previous wills do not tend to stay valid.

Sadly, if you live together but aren’t married or in a civil partnership then your surviving partner may not be entitled to anything if you die without making a will. 

If you’re married or in a civil partnership and you separate from your partner but are not divorced, then they may still inherit your estate. If you are in this position and you want the money to go elsewhere then you will need to rewrite your will.

It always pays to do your own research to find the right financial products for your circumstances. But it can also make financial sense to speak to a professional financial adviser to give you a strong overview of your options.

An independent financial adviser (IFA) is a qualified and regulated professional able to give you advice on the right financial products to help you meet your financial goals. In addition to investment advice, this could also include guidance on the suitable insurance or financial protection products.

While there are few advisers who focus uniquely on offering financial advice specifically tailored to the LGBTQ+ community, some are able to provide insights that will be particularly useful, particularly with regards to life insurance.

For same-sex couples looking to start a family, reviewing your financial protection with a professional can be great way to help you ensure your loved ones can be financially secure, whatever the future holds.